Small businesses are wasting thousands of dollars on employee rewards schemes that fail to retain or inspire staff.

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Rewards Schemes Fail

Small businesses are wasting thousands of dollars on employee rewards schemes that fail to retain or inspire staff.

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Rewards Schemes Fail

News: 13 Aug 2008
Small businesses are wasting thousands of dollars on employee rewards schemes that fail to retain or inspire staff. Michael Derin, founder of accountancy group Azure Group, said the struggle for companies to find and retain good employees was intensifying on the back of a tight labour market.

Australia’s unemployment rate has hit a 33 year low of 4.2 per cent and Derin said the outlook would be even more bleak if businesses did not change their reward strategies.

Employee rewards schemes can prove to be an effective device, as companies look for other ways of maintaining and encouraging staff.

However, Derin warned that it was important that the schemes reflected the needs and wants of employees as well as being suitable financially for the business.

Employee rewards schemes can include lump sum bonuses, salary sacrifices, equity based schemes and extra leave time and each of these types have their own negatives and positives.

Businesses should also be aware of tax implications involved in employee reward schemes, which may make the schemes more costly than first realised.

However, staff rewards schemes can successfully inspire a positive workplace culture, helping to attract staff, increase profits and keep employees happy.

Lump sum bonuses are a popular one as employees are usually grateful for extra money. Salary sacrifices have gained momentum in recent years and can be in the form of items such as laptops, cars and bottles of wine. Be aware that Fringe Benefits Tax will usually apply to these items and can be expensive for employers, even though it is often the most successful reward scheme.

Equity based schemes encourage long term commitment of staff, both in terms of time and inspiration in the success of the business. Extra leave time can be extremely important for employees, especially those with families, in attempting to maintain a work/life balance. This option has the most tax advantages for employers, but may be difficult to administer.

Re-examining or implementing an employee rewards scheme in a business can help give it the extra edge over competitors in regards to staffing. Happy and satisfied employees will save a business an enormous amount of time and money.

Tips for setting up a staff incentive scheme

1)    Establish the goals and objectives that you want the scheme to achieve. Why do you want to reward your staff and what are the expectations?
2)    Undertake some research to try and find out what incentives are preferred by your employees.
3)    Consider the budget and what you can afford.
4)    Be transparent and open with employees and keep them informed on the progress of the scheme.
5)    Start small. The first scheme you put in place does not need to be the perfect scheme; in fact it is unlikely to be.
6)    Establish a scheme before the start of a financial year so that it is linked to the business’ financial goals and an incentive for staff to get the year off to a positive high.
7)    Seek advice from your accountant.
 
By Amber Jamieson
13th August 2008

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